While the first half of this year was marked by the US securities regulator imposing fines on cryptocurrency exchanges, warning of legal action, and then following suit, the second half began in Asia. with a slew of jurisdictions setting new rules for trading – without the lawsuits.
While some Asian countries, such as Singapore and Thailand, appear to be following the United States Securities and Exchange Commission (SEC) in disapproving certain products offered by exchanges, the approach in Asia so far appears to be clarity rather than legal battles, on the other hand with North America.
The United States is in a state of political and regulatory warfare over how to manage the cryptocurrency industry, said John Rizzo, senior vice president of public affairs at Washington-based public relations firm Clyde Group. , in comments via email.
“Congress appears to be making progress on regulatory frameworks for stablecoins and crypto market structure, but the SEC appears intent on essentially banning crypto,” said Rizzo, a former digital assets spokesperson at the U.S. Department. of the Treasury.
According to Zennon Kapron, founder of Asia-based fintech advisory firm Kapronasia, crypto was “always on shaky ground in the US” as regulations were never clear. “For this reason, many companies focused on overseas markets to begin with,” Kapron said in an email interview.
Nick Ruck, COO of blockchain infrastructure platform ContentFi Labs, agrees with this view.
“The biggest problem with the crypto industry in the United States stems from regulators trying to apply a century-old framework to new fintech innovations,” Ruck said in text comments.
Asian countries are attracting crypto firms by clarifying rules and accommodating innovation, he said.
South Korea seems to be one of them. The country’s National Assembly approved on the last day of June a bill focused on protecting the interests of cryptocurrency investors.
Singapore and Thailand followed with rules that include a ban on crypto services, although Singapore authorities added that the product is still under review.
Not to mention Hong Kong – once home to the now bankrupt FTX exchange, which has become the poster child for all that is wrong with cryptocurrency trading platforms.
Hong Kong introduced its own stricter crypto-trading regulations on June 1 and is one of the jurisdictions in Asia vying for a spot as a leading digital asset hub, with all potential investments , the jobs and the financial technological advantage it could bring.
Strict rules
While the new crypto rules in Asia are tough, come with penalties for violations, and will require restructuring by some crypto firms, Lasanka Perera, managing director of crypto exchange Independent Reserve Singapore, said the new rules of the road in the city-state are welcomed.
“This not only underscores the regulator’s belief in protecting investors, but will no doubt inspire greater confidence from the corporate and institutional sectors,” Perera said in an emailed statement.
While South Korea’s Virtual Asset User Protection Law will not come into effect for another year, it is the country’s first step in building a legal framework for digital assets, according to the official website of the Assembly.
The bill was approved just over a year after the collapse of the US$40 billion cryptocurrency and stablecoin Terra-Luna, which was founded in South Korea and caused losses to hundreds of thousands of investors.
As its name suggests, the South Korean bill focuses on investor protection and provides penalties for rule violations, including fines and jail time.
As an aside, the founder of the Terra-Luna project, Kwon Do-Hyung, is now in prison in Montenegro after fleeing to Europe. South Korea and the United States want to extradite him for fraud. He denied the allegations.
Lots of bills
Back in the United States, Congress conducted extensive discussions on digital assets, wrote John Cahill, an attorney in the New York office of the law firm Wilson Elser, in a Forkast comment this month.
Recent hearings with the chairmen of the SEC and the Commodity Futures Trading Commission showed the varying opinions on cryptocurrencies and the legislative deadlock, Cahill said.
More than 30 bills related to digital assets have been introduced in Congress, but to date none have advanced and Congress has yet to pass substantive legislation in this area, according to Cahill.
“Despite continued efforts to gather information, the legislature has been reluctant to take concrete action,” he said.
For this reason, Cahill said national courts have stepped up to interpret digital assets within the existing legal framework. But as “the courts have been inundated with submissions detailing why, or why not, digital assets should be considered securities,” progress is being delayed.
“As Congress and its constituents continue to learn about this developing technology, it will be up to the US justice system to connect current laws to digital assets while helping to navigate these uncharted legal waters,” Cahill added.
Is the SEC just doing its job?
After the collapses of Terra-Luna and the FTX exchange last year, causing billions of dollars in losses for millions of investors and triggering a cascade of bankruptcies among dozens of related companies, everyone in the world of digital assets is not saying the SEC has it all wrong.
Blockstation, a blockchain-based platform for tokenizing, listing, trading, clearing, and settlement of digital assets and securities, wrote an internal memo in 2015 that allegedly stated that when the crypto market reach a market capitalization of around $1 trillion, regulators would respond with enforcement action.
“We called it, and that’s exactly what’s happening right now,” Blockstation CEO Jai Waterman said in an email response to questions.
“Regulators are against unlicensed brokers trading securities, and they are against unregistered securities offered to the public,” he said. “What the industry calls cryptocurrency are primarily securities, and it’s the regulator’s fiduciary responsibility to protect investors,” he added.
What the industry calls cryptocurrency are mostly securities, and it’s the regulator’s fiduciary responsibility to protect investors
Jai Waterman, CEO of Blockstation
If you ask an investor if they’d rather send money to Binance to trade bitcoin or if they’d rather Merrill Lynch do the same, most would choose the latter, Waterman said, adding that it’s because established brokers have the credibility, governance, and proven infrastructure.
The missing piece is that these institutions lack proper guidance from regulators and lack the necessary blockchain technology and education, he said.
A spokesperson for Circle, the issuer of the USDC stablecoin, said Forkast that the SEC lawsuits are “long overdue actions” and are on the cusp of Congress “very seriously considering regulating the stablecoin and digital asset market.”
The spokesman, who declined to be named, added: ‘We now effectively have all three branches of the US government clearly signaling that they want to see legislation.